Calculate percentage of completion for each of three years

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Question - Accounting for Construction Contracts - XYZ Ltd signs a contract on 30 June 2015, agreeing to build a bridge for ABC Limited at a contract price of $40 million. XYZ Ltd estimates that construction costs will be as follows:

Year Ending Cost

30 June 2016 $10 000 000

30 June 2017 $16 000 000

30 June 2018 $ 6 000 000

$32 000 000

The contract provides that ABC will make payments on 30 June of each year as follows:

2016 - $8 000 000

2017 - $20 000 000

2018- $12 000 000

$40 000 000

XYZ now estimates at the beginning of the 2017 financial year that construction costs will be as follows:

Year Ending Cost

30 June 2016 $10 000 000

30 June 2017 $21 000 000

30 June 2018 $15 000 000

$46 000 000

Required -

a) Calculate Percentage of completion for each of the three years?

b) Calculate Revenue to be recognised in each of the three years?

c) Calculate Gross profit/loss to be recognised in each of the three years?

Reference no: EM132969472

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